Sacco reforms to clean up its books

Members of the Metropolitan Sacco queue for their annual dividend pay-out outside their offices along Koinange Street, Nairobi in April 2019. [Elvis Ogina. Standard]

The giant Metropolitan National Sacco’s change of operational strategy has seen its loan portfolio rise by 16 per cent.

Its total surplus for 2019 rose by Sh22 million. The institution has also recovered Sh110 million from non-performing loans that have dogged several lenders across the country.

“The Sacco has seen a reversal in members who wished to withdraw their membership while the few who had submitted withdrawal notices are still offered full membership benefits including dividends,” said Sacco Chief Executive Benson Mwangi.

The Sacco’s woes had in 2017 seen loans to members surpass savings - leading to a sudden increase in non-performing loans.

“This was further aggravated by the increase in delayed remittances as some employer partners experienced problems related to the economic downturn at the time,” Mr Mwangi told Weekend Business.

The Sacco, he noted, has now taken a reform path to grow its capital base.

He said the reforms have been discussed with the regulator - the Sacco Societies Regulatory Authority (Sasra). “We have partnered with the Cooperative Bank, through its advisory arm and the cooperatives division in a joint effort to support the Sacco’s turnaround,” said Mwangi.

He observed that with an asset base of over Sh5 billion, Metropolitan Sacco has embarked on a growth strategy anchored on diversification, customer service excellence and developed products.

Members’ support

The changes implemented led to a payout of Sh3.5 billion in dividends and interest on deposits within the past 10 years. “We issued over Sh25 billion in loans and advances over the ten years. We now have a standing loan book of Sh14.9 billion,” he said.

Some of the changes that occurred were informed by the growth, which Mwangi said led to strategic moves to make the business sustainable.

He said a tanking economy led to a shortfall in liquidity, which impacted on service to members. Despite this turbulence, the Sacco remained profitable and solvent.

He attributed the institution’s ability to stay afloat to support of members who have invested in it. “The board and management were quick to realise that there was a problem and took action to arrest the situation.”

Following implementation of the changes, operational expenses have dropped by Sh80 million while salary access has been fully enabled through ATM in partnership with Cooperative Bank and on mobile banking platform.

From a teachers’ only Sacco formed in 1977, the society operates 12 branches. In 2008, the financial institution undertook a massive leap which saw its membership grow from 5,557 to over 50,000 currently.

This can be attributed to the opening up of membership to other members not necessarily teachers.